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Sales and operations planning (S&OP) is challenging enough without having your operations on the other side of the Pacific. But that's the situation Radisys Corp. faced when it started outsourcing manufacturing to China.
Fortunately, the company has found a silver lining in the cloud. By adopting E2open's hosted E2 Planning and Response software, the company linked its on-premises SAP ERP and Steelwedge cloud S&OP software to build a global supply chain planning and execution process. The result has been a much quicker response to prospective orders and inventory savings of $10 million plus.
"When I first joined Radisys, they had a process, but it was very fragmented, meaning everyone had their own version of the truth," said Lisa Aleman, senior director of sales and operations planning and execution at the company, which is based in Hillsboro, Ore. "Although there was a number that was put out there, there was never a consensus supply-demand number and then [a] revenue picture that would come out of that. Operations might meet with finance, but not necessarily with the business unit. And sales was never really tied into the process at all."
Radisys hired Aleman expressly to improve the S&OP process and bring in technology. She had handled S&OP since the mid-1990s for AMI Semiconductor, later bought by ON Semiconductor.
When she arrived in 2010, Radisys, which makes wireless infrastructure for telecom, aerospace and defense, was mostly using SAP Advanced Planning & Optimization (APO) for planning. Finding SAP APO too slow and inflexible, Aleman and colleagues in early 2011 began designing an implementation of Steelwedge and supply chain planning and collaboration software from icon-scm, which SAP resold as an APO add-on. E2open bought icon-scm in 2013 and renamed the product E2 Planning and Response (E2 PR).
"When we were doing the shadow planning with the [previous] contract manufacturer, Radisys noticed that their planning was saying that the contract manufacturer can actually produce more than they were saying," said Steve Lykken, E2open's vice president of customer solutions, who was then with icon-scm. "The contract manufacturer had a different planning system."
Integrating sales and operations
Aleman is a strong believer in shoring up business processes before automating them. "People have a lot of difficulty -- if they haven't seen this kind of automation -- basically modifying their business processes and adopting the automation simultaneously," she said. "If you can run that process manually, you can work the bumps out of it before you [implement] the automation."
She had experience implementing complex supply-chain engines from i2 and Oracle and knew that data cleansing could take longer than expected, so she built an eight-week gap into the project plan. "When you put these solution sets in, you're using data differently," she said. "Although it's coming from the system, it creates some problems."
Radisys handled the troubleshooting of the beta system, aided by what Aleman calls E2open's "robust" error checking. "As information is sent into the system, it knows when it's throwing errors, so it would be able to help point us where we need to go look," she said.
The company went live on Steelwedge first, then on E2 PR, with each implementation taking six months. The vendors are partners and worked on the projects jointly, developing blueprints and running workshops.
Aleman knew she would need good integration between SAP APO, E2 PR and Steelwedge to offer new commitment options for sales orders, such as capable-to-promise guarantees, which take production capacity into account and are more reliable than available-to-promise formulas, which only consider materials. "I knew that the bidirectional data feeds did not exist, and I thought I would have to write them internally, meaning that I could take commitments coming out of the E2open engine and push them directly to SAP without someone having to do that manually." But thanks to a partnership between E2open and SAP, "my guys didn't have to do it," she said.
The integration adapters are essentially bidirectional data feeds between Radisys' applications, including the Agile product lifecycle management system that holds most of the product information and bills of materials (BOMs) that can contain up to 2,500 components. Parts masters come from SAP ERP; BOMs from Agile; and data files from Ennoconn, the division of Foxconn Technology Group in Shenzhen, China, that does the manufacturing. Sales order commitments and ship dates in E2open PR go back to SAP. "They now write back, directly to the SAP system, the order delivery dates that we calculated in the plan," E2open's Lykken said.
The E2open cloud network makes the distance across the world's largest ocean all but disappear. "I have full visibility to what's happening there. I know every purchase order they've placed, I know what inventory they have on the floor, I know what all their lead times are for all of their materials," Aleman said. "If I take any orders, I don't have to check with my contract manufacturer. I already know the answer, even before they know that that demand has come in."
Radisys and Ennoconn employees needed significant training on the new system. Aleman and a team went to China to give hands-on demonstrations.
Now more than 20 people use E2 PR, all of whom report to Aleman, who is responsible for both supply chain planning and execution. That means she oversees everything from demand generation to fulfillment, and "owns" execution on the manufacturing floor. "It's a nice pairing because if I need stronger demand, I have the team that basically works that side," she said. "If I want to take a little risk on the supply side, [I can] also understand what the implication's going to be for the manufacturing floor."
The planning engine in E2 PR lets Radisys examine a particular demand for a product and know, for example, if a commitment has already been made and who the customer is, E2open's Lykken said.
"You can create these priority rules based on any information in the demand, and use them to drive the planning. For Radisys, for example, their No. 1 rule is they always keep previous [commitments]. They can commit with the confidence that the supply is really there."
S&OP across the ocean
The E2open software has brought a huge change to the S&OP process and allowed Radisys to be much more agile in responding to the fast-moving telecom market, according to Aleman. For example, sometimes a product's designer will "float" the demand to manufacturers. "If you can respond first, you're going to win the business," she said.
The S&OP process used to take at least two weeks. "Now, as soon as the demand hits, I have a commitment instantly," she said. When opportunities arise, Aleman can run scenarios at any time to see if a commitment is feasible and if not, how to make it happen.
Forecasting, which used to be a serial process dictated by Radisys' monthly S&OP schedule, can now happen anytime. Before, Radisys' S&OP and a customer's S&OP and forecasting cycle "could be out of sync as much as two to three months," Aleman said. "Now we've tied those up tightly."
The better visibility into supply and demand enabled Radisys to cut $10 million from the past year's inventory by not having to run all production according to a build-to-forecast model. "We use multiple build models now," Aleman said.
"When a product is waning in its lifecycle -- so it's very mature and likely to complete its lifecycle -- you don't want to continue to build to forecast, because you don't know for sure what the demand is going to be, and it leaves you with excess and obsolescence on your books," Aleman said. Now she can shift such products to build-to-order and not make them or buy materials without an order in hand. However, the company still uses build-to-forecast for customers with whom it has vendor-managed inventory partnerships and who are held liable for the material.
Future plans include a "pipeline bridge" from Steelwedge to Salesforce so salespeople can get a better view of the demand tracked in the E2open system. It will help to align sales incentives with the new S&OP. In prior years, salespeople were given incentives based on design wins. Now they'll be rewarded based on revenue from orders that manufacturing fulfills.
Aleman would also like to work with E2open to get more robust inventory reporting and modeling, and she hopes to use E2open's collaboration features to bring large customers' own forecasts into the Radisys tools.
Aleman describes the S&OP process with evident pride. "It is supported at the executive level, and everyone runs to the same plan, from the sales guys to the finance guys to the operations guys," she said. "It's one holistic process."
Radisys is nearing the top level of the five-level S&OP maturity model put forth by research firm Gartner. "We're starting to now work with our customers and having conversations about what we can do collectively between us," Aleman said, rather than having customers "chuck" their demand over the wall and leave Radisys to wrestle with it. "It's becoming much more of a partnership."
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